Realtor Charged me $59,500 to prepare my house to sell but incomplete info and I cannot get in touch with them now to resolve

[zenmster]

1. the realtor that sold my house agreed to front the costs of fixing up my place to sell. 

2. there is a line item in the final "seller's statement" from the Title company that says:

"Prepaid Listing Prep Fees"  which is how much spent to prep the house for sale = $59,500

3.  When I list in TT my expenses related to the sale of the house - can I just list $59,500 expense and not break it down by each individual thing (e.g., labor, paint, washing machine, etc)?  

4. Wouldn't that be the realtor's responsibility to provide all the receipts and breakdown in their tax return? 

5. Totally, lost on this ESP since the realtor gave me some receipts for things but not everything...

[Opus 17]

This answer applies to personal property.  The rules for business or rental property will be somewhat different.

You can't include as expenses, anything that changes the home.  Minor repairs, painting, and other maintenance items are not allowable to reduce your selling price or increase your cost basis.  These are things you should have been doing all along as a responsible property owner and you don't get tax breaks for them even when you sell.

Any permanent changes that count as improvements or betterments can be added to the cost basis.  This could include a new roof or new flooring, but does not include minor maintenance and repair items like fixing a leaky faucet or painting. 

You can't include the cost of appliances that were sold with the home.  In most cases, your seller's contract will say that you sold the home for the full price and the appliance and any contents for $1.  That's technically a capital loss (you buy for $1000 and sell for $1) but losses on personal property are not deductible.

You can include advertising as a selling expense, and advertising can include "staging" and other costs of preparing the house to show.  But advertising does not include painting or other fix-up costs.

If audited, you have the burden of proving how you arrived at your figures for cost basis and adjustments to the selling price and capital gains.  If audited, you won't be able to use the excuse "the company didn't give me the figures"--it's your burden to get them, or to not claim anything you can't prove.  However, most people aren't audited. 

[zenmster]

What do you mean "added to the cost basis"? Can you give an example with #s? 

[Opus 17]

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@zenmster wrote:

What do you mean "added to the cost basis"? Can you give an example with #s? 

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Suppose you paid $100,000 for the home. 

Then, you replaced the furnace for $5,000.

Your adjusted cost basis is now $105,000.

You sell for $225,000.  You have $30,000 of selling expenses. 

Your net selling price is $195,000 and your cost basis is $105,000, so you have a capital gain of $90,000.

If you received a 1099-S at the closing, it may be necessary to report the selling price as $225,000, so it matches IRS records.  You would then include the selling expenses in the cost basis, so the capital gains comes out the same.

If this was your personal home for at least the last 2 years, you may be able to exclude the first $250,000 of capital gains from any tax, or $500,000 if you are married filing jointly.

You can review this all here.

https://www.irs.gov/pub/irs-pdf/p523.pdf

[zenmster]

WAIT-this is a RENTAL PROPERTY. what is “somewhat different?” in your answer?!

[Critter-3]

For a rental these would be considered repairs in the year of sale and reported on the Sch E.   

[Opus 17]

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@zenmster wrote:

WAIT-this is a RENTAL PROPERTY. what is “somewhat different?” in your answer?!

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For a rental property, you still have to allocate your cost between improvements, repairs, and selling expenses.  But in the case of rental properties, the repairs can be deducted as a rental expense, assuming the house was actively being rented or marketed as a rental when you put it up for sale.  Improvements increase your cost basis, and selling expenses reduce your net selling price, as before.   (There is a reason that repairs are treated as a rental expense rather than an adjustment to capital gains, but I don't think I could do a good job of explaining it simply.)

[zenmster]

are  

 improvements, repairs, and selling expenses

actual TT categories? Not seeing at first look in TT

[Affordabletaxes2021]

They’re not categories in TurboTax. Improvements are added to your cost basis. Say the cost of your home was $100,000. You add a new roof for $20,000. Your cost basis is now $120, 000. You sell it for $150,000. Your gain is $30,000. 
if you did not add a roof, you pay $100,000 and sell it for $150,000. $That’s a $50,000 gain  so adding your improvements to your cost of house gives your your adjusted cost basis which is higher and provides for a tax break. 
The only time it matters is when you sell it. That’s when you need to figure your adjusted basis. 
it’s not something that is entered into TurboTax 

Repairs are deducted during the year from a rental unit as an expense. Selling expenses are added to the cost of selling the property upon sale if the unit. 

[Opus 17]

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@zenmster wrote:

are  

 improvements, repairs, and selling expenses

actual TT categories? Not seeing at first look in TT

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I haven't practiced with this section of Turbotax.  In some places, Turbotax has a "guide me" interview that walks you through things like adjustments to basis.

Since this is a rental property, you should already be filing a schedule E for the rental income and expenses.  Repairs are listed there.  There should be a place in the rental section to indicate "I sold the property this year" which will take you to the capital gains calculation. 

@Critter-3 

@Carl 

Can you advise the taxpayer on where these items go in the actual program?

[zenmster]

Yes, I def am filling out Sched E since i started renting. Everything (e.g., rental income) has been above board reporting annually to the IRS et all.  About to dive into taxes again and see if I can figure it out. 

Does anyone know:

1. if you can pay TT to review your taxes after you finish? I am NOT talking about the automated check that TT does as part of the TT program.  If they do, anyone know how  much they charge?

2. What the deadline is to e-file tax year 2021? 

Thanks all in advance.  

[Carl]

You state this is rental property. The below applies. Understand that any repairs, as well as maintenance expenses are rental expenses up until the date the last occupant vacated the property, or you stopped actively trying to rent the property; whichever is later. Any repairs and routine maintenance done after that date are just flat out not deductible anywhere on your tax return.

If you had the property listed as "for sale or rent", then you're fine so long as you didn't stop trying to rent the property before you signed your sales contract committing you to the sale - regardless of how long after signing the sales contract your actual closing date was.

"Prepaid Listing Prep Fees" which is how much spent to prep the house for sale = $59,500

Sounds to me at that price, like you paid for staging. That is, for the house to be furnished/decorated for showing to perspective and interested potential buyers. If so, it gets included in selling expenses. Now those "prep fees" seem a bit on the high side. But my impression could be wrong depending on the location of the property. Just exactly what did those "prep fees" pay for? (As best you can recall).

Reporting the Sale of Rental Property

If you qualify for the "lived in 2 of last 5 years" capital gains exclusion, then when prompted you WILL indicate that this sale DOES INCLUDE the sale of your main home. For AD MIL personnel who don't qualify because of PCS orders, select this option anyway, because you "MIGHT" qualify for at last a partial exclusion.

Start working through Rental & Royalty Income (SCH E) "AS IF" you did not sell the property. One of the screens near the start will have a selection on it for "I sold or otherwise disposed of this property in  2021". Select it. After you select the "I sold or otherwise disposed of this property in 2021" you continue working it through "as if" you still own it. When you come to the summary screen you will enter all of your rental income and expenses, even if it's zero. Then you MUST work through the "Sale of Property/Depreciation" section. You must work through each individual asset one at a time to report its disposition (in your case, all your rental assets were sold).

Understand that if more than the property itself is listed in your assets list, then you need to allocate your sales price across all of your assets.  You will only allocate the structure sales price; you will NOT allocate the land sales price, since the land is not a depreciable asset.  Then if you sold this rental at a gain, you must show a gain on all assets, even if that gain is $1 on some assets. Likewise, if you sold at a loss then you must show a loss on all assets, even if that loss is $1 on some assets.

Basically, when working through an asset you select the option for "I stopped using this asset in 2021" and go from there. Note that you MUST do this for EACH AND EVERY asset listed.

When you finish working through everything listed in the assets section, if you ever at any time you owned this rental you claimed vehicle expenses, then you must also work through the vehicle section and show the disposition of the vehicle. Most likely, your vehicle disposition will be "removed for personal use", as I seriously doubt you sold your vehicle as a part of this rental sale.

[zenmster]

Los Angeles where the homes are going for ridiculous amounts.

Fees my realtor charged were definitely for some staging but also, some new appliances, and renovations in the form of painting, wood floor refinishing, fixing up a deck, and doors and faucets, etc. 

[zenmster]

yea but what's an asset?  Dishwasher? Stove/Range? I think those were the only new appliances because the others were not working by the time my last tenants left. 

Is a newly fixed deck an asset? Newly painted walls?  New lighting fixtures?  

Also, I am assuming that I can deduct labor - painter, handy man, stager fee (approx $4000). 

?

[Carl]

For rental property, an asset is anything you can physically touch that is used in the production of income. Since you replaced the appliances after the last tenant moved out and prior to the sale, simply add the cost of those appliances to your cost basis. To do that in the SCH E section of the program without being forced to depreciate the asset is a bit tricky - but doable.

Just enter the total of all the assets you purchased after the last tenant moved out, as a physically separate asset entry in the assets/Depreciation section. So if you purchased a stove, dishwasher, microwave, etc. add up the total cost of those items and name the asset "Appliances". Enter the total cost and classify the entry as "appliances". Make the business use percentage 0.1% since they were never actually placed "in service" (the program will not accept 0%). Then make the in service date the closing date of the sale. I doubt any depreciation will be taken. But if it is, it will be so negligible that it won't matter on the tax front. Just remember, you have to allocate some of your structure sales price to those assets, and if sold at a gain your sales price must be "at least" $1 more than the cost basis.